Risk assessment

Continuation of favourable growth path

Growth is expected to continue on an upward trajectory in 2018, thanks to the moderate economic recovery in Nigeria and improved agricultural performance. Cotton production especially, in the absence of a major climate shock, is likely to rise, as is the cotton price. Growth will also be maintained by public and private investment, especially in connection with the government’s action plan: “Benin Revealed”, costing USD 15 billion over five years (2016-2021), i.e. 170% of GDP and focusing on infrastructure, energy, tourism and agriculture. The recently signed public-private partnership law should stimulate participation by the private sector. With the aim of making growth more inclusive and eradicating poverty, the government will continue programmes to reduce the isolation of the most remote regions, notably thanks to the completion of a railway line connecting Cotonou to Niamey, which will also boost activity at the Port of Cotonou. Private consumption trends will remain dynamic overall, while inflation in 2018 is expected to remain below the 3% threshold fixed by WAEMU, in a context of gradually rising domestic demand and higher prices for various import products (fuel, foodstuffs).

Gradual adjustment to the current account and fiscal deficits

While expansionary policies have put a considerable strain on deficit and debt in recent years, the government is expected to adopt a more restrictive approach in 2018 through a certain number of reforms aimed at rationalising spending and modernising the fiscal and customs regimes. Moreover, the IMF’s approval in April 2017 of a three-year arrangement under the Extended Credit Facility for an amount of USD 151 million is expected to facilitate the reform programme and thus restore investor confidence.

The current account deficit is expected to persist, but will reduce in 2018 due to an improved trade balance. Exports (44% of which is cotton) are expected to increase significantly thanks to rising cotton production, accompanied by more dynamic external – particularly regional – demand, thanks to the Common External Tariff. Imports are likely to remain relatively as dynamic as before due to the considerable volume of imports of capital goods and domestic demand. Informal trade continues to occupy a predominate position, with transit trade and re-export trade to Nigeria representing 20% of GDP. Remittances from expatriate workers (of which almost half come from Nigeria) and aid should lead to a higher surplus in the balance of transfers. The current account deficit is mainly financed by concessional loans and by flows of FDIs associated with the activity of public-private partnerships for infrastructure services.

A commitment to reform by a president facing popular discontent

Businessman Patrice Talon won the presidential elections in March 2016. He has set out an ambitious programme of reforms, aimed, in particular, at restoring investor confidence; especially via prioritising an improvement in a business climate that is marked by corruption, patronage, red tape and a weak regulatory framework.

Despite some progress on business start-ups and insolvency resolution – the World Bank’s Doing Business report ranks the country 155th out of 190 countries (153rd in 2016) – progress is slow, and his popularity amongst the public is crumbling in a context of rising popular discontent linked to the lack of social progress. Moreover, the rejection of the single-term presidency plan, although supported by President Talon, could result in him standing again in the next elections in 2021 despite having said he would abstain. Nonetheless, the new coalition formed in May 2017 and composed of 59 members of parliament brought together to form the BMP (majority bloc of parties in the National Assembly) supports the president, which could potentially speed up the implementation of the reforms.